The UK government plans to introduce legislation that would prevent foreign governments owning UK newspapers and news magazines in a significant move that could scupper the planned £600m sale of the Telegraph to a United Arab Emirates-backed consortium.
RedBird IMI – a partnership between a fund backed by the UAE’s vice-president, Sheikh Mansour bin Zayed Al Nahyan, and a privately owned US investment firm – is seeking to acquire one of the UK’s most influential newspaper groups.
However, the planned takeover has been fiercely opposed by many Tory MPs and peers who have raised concerns about the Gulf state’s record on press freedom.
On Wednesday, the media minister, Lord Stephen Parkinson, announced in the House of Lords that the government would put forward an amendment preventing foreign state ownership of newspapers or news magazines. The planned acquisition of the Telegraph by Redbird IMI is widely expected to be blocked if the proposed legislation goes ahead.
Parkinson told the Lords the amendment would rule out “newspaper and periodical news magazine mergers involving ownership, influence or control by foreign states”.
“There is scope to provide greater clarity and bring forward a comprehensive and clear plan to make that explicit in legislation,” he said.
The government measure surprised peers by going further than a previous amendment proposed by Baroness Tina Stowell, the Tory chair of the Lords communications and digital committee, who has been leading the campaign in the Lords to stop the Conservative-supporting media group from being taken over by Redbird IMI. She responded by withdrawing her proposal.
While Stowell had proposed giving MPs a vote on whether to bar the purchase of UK newspapers by foreign state interests, the government’s legislation would impose a simple ban. Pressure had been building on Rishi Sunak to step in, partly because of Stowell’s amendment, which had won the backing of 100 MPs.
“Allowing foreign governments to own such a critical and sensitive part of our nation would damage public confidence in all of us yet further if it was allowed to happen,” Stowell told the Lords, saying that the Telegraph bid had “exposed a gap in the law”.
She added: “My concern is not just about the potential acquisition; what this situation has exposed is that in law there is nothing that clearly prohibits the acquisition of a UK news organisation by a foreign power or organisations under significant government control.”
The government will publish full details of its legislation on Tuesday (19 March) but it is expected it could come in the form of an amendment to the 2002 Enterprise Act. Parkinson told the Lords that the law would also allow certain investment by foreign powers below a low threshold.
The government has said that the Competition and Markets Authority (CMA) would be obliged to investigate whether a merger has, or would result in, foreign ownership, influence or control. The culture secretary could then issue an order blocking or unwinding the merger.
A spokesperson for RedBird IMI said: “We are extremely disappointed by today’s development. To date, Redbird IMI has made six investments across the UK and US, and we believed the UK’s media environment was worthy of further investment.
“As with each of our deals, we have been clear that the acquisition of the Telegraph and the Spectator has been a fully commercial undertaking. We remain committed to developing powerful and commercially sustainable global media assets. We will now evaluate our next steps, with commercial interests continuing to be the sole priority.”
The sale of the Telegraph has been on hold since last year, when the Barclay family officially regained control of the newspaper group, which also includes the Spectator magazine, after RedBird IMI helped pay off its £1.2bn debt to Lloyds Banking Group.
A group of Conservative MPs then urged the government to use the UK’s national security laws to investigate the proposed deal. Last November, the culture secretary, Lucy Frazer, asked the CMA and the media regulator, Ofcom, to look into whether the takeover breached public interest concerns about press freedom and media plurality.
IMI has sought to reassure ministers and MPs during the bid process that it remained an “entirely passive investor” with no management or operational rights in relation to the Telegraph, and has said there would be an independent editorial trust board to protect editorial independence.
However, the Department for Culture, Media and Sport noted in a letter to RedBird in January that IMI “is privately owned by a member of the UAE government” and said the government “remains concerned about the potential influence” of the fund, which owns 75% of the joint venture, over the Telegraph “which could affect the free expression of opinion and accurate presentation of news” in the newspapers.
The latest moves in parliament do not affect the quasi-judicial decision that Frazer must make in the coming days as she considers the reports from Ofcom and the CMA on the implications of the RedBird IMI deal, which her department received on Monday.
She must decide whether to open a phase 2 investigation, where the CMA is given 24 weeks to assess whether the deal operates against the public interest and whether any remedies can be instigated to let the merger proceed.
Lloyds had originally put the Telegraph group up for sale, but it did not make it to a fully fledged auction process after the RedBird IMI intervention. Earlier this week, Bloomberg reported that Rupert Murdoch’s News UK and DMGT, which owns the Daily Mail, had shown interest in the Telegraph and Spectator assets and were closely monitoring the situation.
